I don’t know how I feel about that. Here’s some background information:

Last night I was listening to Dave Ramsey on the way home from work. A senior in high school called in asking Dave for some advice. She said that she had some really great schools lined up, had been accepted to each, and was struggling to make a decision as to where to go. After accounting for all of the costs, she explained that to get her Bachelor’s Degree she would be looking at 50-60k of student loans by the time she was done; that after considering 20 hours of work per week. She had applied for all the government grants and scholarships she could.

Dave’s advice: find something local or attend an online university and DON’T go into debt for school.

He then began to talk about the hiring process that takes place when he’s looking for people for his business. He currently employs 200+ people and said that in his experience, he doesn’t care WHERE you were educated; to him, you just need to have a college education- that’s it. More importantly, he’s looking for good experience and somebody who can think for themselves. In his experience, he’s seen way too many people in the middle of their careers bogged down with big school debt.

I don’t doubt that at all.

Why It’s A Good Idea Not To Finance Your Education

I have to admit- Dave makes some excellent points about why financing your education is a poor idea. Based on what Dave says and based on some of my own experience, there’s a couple of reasons why it may not be a good idea to finance your education. Again, Dave makes it clear that you don’t want to be paying off student loans into your mid-thirties. And this is something he sees all the time, often really handicapping peoples’ ability to move forward financially with their lives. Debt is a real form of bondage.

Here’s my thought: if you’re planning on going to graduate school, why worry so much about your Bachelor’s? In business is doesn’t make a huge difference WHERE you got your undergrad. It’s more important that you do well on the GMAT and get some decent experience, as well has having great interview skills. So if that’s the case, go to a smaller school that isn’t quite as prestigious and save some money.

Again- that’s just if you’re planning on going to grad school. Then again, if you’re getting your undergrad at a top 10 school, the opportunities for great networking (which I think is one of the most important parts of college) and great internships are much more substantial. Those internships, in turn, give you the credentials that are going to be necessary to get into a great MBA program.

Anyway- I can see the pros and cons. You thoughts?

Why It’s A Good Idea To Finance Your Education

Again, I’m talking more in terms of graduate school. Look- if you do well enough on the GMAT, apply to a top 5 MBA program, get accepted, and find yourself not being able to work while accruing massive amounts of student debt at a place like Harvard or Standford, don’t you think that’s worth the cost? The median salary coming out of a school like that is well over 100k a year, and come on- who’s really unhappy about getting educated (as far as business is concerned) at a place like that?

How else do you pay for such an education without going into debt? You can’t work. Maybe scholarships? That won’t be easy either. In addition, you’ll want to be aware of the opportunity to get into a bad credit loan.

In terms of your Bachelor’s degree, I’m just not sure agree or disagree with Dave. It seems like there’s some pretty good pros and cons for both financing and not.

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Here’s my conclusion: I don’t think you can make a sweeping generalization about whether its “okay” or not to finance your college education. Everybody is different and each college major is different; different to the point where you can’t just say one way or the other is best.

Thoughts on what Dave said?

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A smart way to keep you out of debt is to get the best rate of return on the money you have. Usually a good online bank can have some of the best bank deals because of their low overhead expenses. Always search around for the best rates for your money.

21 Responses to “Dave Ramsey Says That Going Into Debt For School Is Never A Good Idea”

So what if you get into the best school possible? The one you have been dreaming about attending ever since you were a child. Are you not going to go just because of Dave Ramsey? There is no right or wrong answer and it depends on the person.

Also just because he doesn’t care about your education it doesn’t mean that other employers don’t. Think about it everything is so competitive these days that only the best of the best get in.

@Studenomics: Absolutely. So what happens when you get into Wharton or the University of Chicago and you can’t pay cash for it? Come on- how many people can pay cash for that type of thing? Look at the alumni for places like that… you think they’re in debt in their thirties for student loans? These guys are MULTI-millionaires. It’s crazy!

The grad school thing: In my field it is a lot easier to get into a top grad school if you have at least a respected (if not top) undergrad. Not impossible if you don’t, but it is harder for sure.

Employers do care, to a degree. More than that, it affects what kind of employers will be at your school’s career fairs recruiting you. But it only REALLY matters for that first job. After you have experience, you can go where ever if you are good. I’m speaking from experience here, my current employer likely wouldn’t have glanced twice at my college resume, but even just 1.5 years was enough.

60k of debt is a lot, so you better be sure it is worth it. If you plan to go into a low paying profession, it likely isn’t. If you are going to be a M.D, 60k is a bargain.

It’s worth it if you don’t go too far in debt. Seems he was telling the guy to just get a degree from a low-cost university instead of paying out the nose at an expensive school that will not do much for you.

That’s the approach I took. I graduated from one of the cheapest universities in the state and worked right along side private schoolers who spent multiple times more for their education. What exactly did they get for their money?

You have to go into debt to get a degree but why do it going to a private university? Just go to a state university with lower costs or get your basics at a community college.

For me, I am *so* thankful that I never had to resort to student loans… I certainly wouldn’t find myself in the same situation that I am now — and it’s been over 10 years since I’ve been out of school. Student loans would have crippled me financially.

That said, going into debt for a degree isn’t a bad idea but it’s not a great idea either.

Going into debt for grad school or an MBA, on the other hand, is stupid. VERY stupid.

Here’s why — there is NO guaranteed return on that investment. None.

Anyone bantering around the idea of “going back to school” years after they’ve already graduated is kidding themselves, really, let’s be honest.

They’re not going to be handed a better job or a higher paying job just because they have another degree. It doesn’t work like that…

It’s almost as if people in their 20’s are under the impression that an MBA is like a ticket to a six figure salary and a signing bonus… Sure, it may work for some, but most of them will find themselves working alongside schleps with BA’s in Art History — except they’ll also have a 6-figure student loan balance that they’ll spend the rest of their lives paying down…

@Brainy: I appreciate your comments; however, I certainly don’t agree with the following:

“Going into debt for grad school or an MBA, on the other hand, is stupid. VERY stupid.” Really? I don’t think it’s easy to make a generalization like that. If you have real talent and a lot of potential, why would you not go to a top 5 MBA program? Yes- it’s not for everybody, mainly because nearly “everybody” can’t get in. But if you can, do you understand the ramifications of making a decision like that? What kind of people/companies recruit out of places like Wharton, HBS, and Kellogg?

“Anyone bantering around the idea of ‘going back to school’ years after they’ve already graduated is kidding themselves, really, let’s be honest” Many people end up going to those types of schools after having years of work experience- it’s actually what they’re looking for.

Honestly, though, you are right about one thing- just because you get an MBA doesn’t mean you have a one-way ticket to financial success. But if you want to set yourself up for a good chance at climbing the ranks in the corporate world, then this is a good thing. It just depends on the person.

I have to agree with Dave for the most part on this one. I don’t think in most cases that having a degree from a top flight school is going to get you much further than a degree from a state university. The biggest difference is going to be the price tag.

I’m in my 30’s now, and I see way too many of my peers who are still saddled with school loan debt in the tens of thousands of dollars. One guy as 50k in debt for an art degree he never used. Another went back to get an MBA and really isn’t making that much more.

For most people I don’t think what school they go to will matter that much. Yes, in some careers it may give you a boost, and in some cases almost be necessary to go to a top flight school, but for most careers any good state school will be just fine.

Don’t fall for the trap that says, “you only go to college once, you may as well finance it and have a good time!”. If you do, you’ll be paying for it for years.

I think that everyone should pay for as much of college as they can, but I don’t think that anyone should choose not to education because of debt. Education is priceless, if it is something you are passionate about.

But if money is really a concern, a good strategy is to work for a while for a company that might be willing to pay for your MBA, which happens sometimes.

When I was deciding how to pay for college, I read a bunch of articles presenting payment options…I read a pretty unbiased guide on the findingDulcinea education Web site, if anyone is interested. [http://is.gd/jrub]

The key thing to know is what the payoff of the loan will be. If you’re financing medical or law or business school, then of course it may be relatively safe to say that you’ll at least be making enough to pay the minimum on your loans comfortably.

But financing private undergrad school is a much riskier proposition. Most 17-18 year olds (rightfully) have no idea what they want to do or be when they “grow up.” They don’t KNOW what kind of job they might want – or better yet what job they might get. Hundreds of thousands of students pay or borrow a LOT of money to go to college and end up with jobs they could have gotten get without the degree – or with jobs that can’t pay the student loan bills.

Unless you have a specific ambition and you know/intend that college will help you reach it, I think it’s generally inadvisable to finance private college tuition – or really expensive public school tuition (unless you have parents who can and will help if you do end up not being able to make ends meet until you’re 30). Go for a year to community college or to a state school and then reevaluate your goals.

A good friend of mine co-signed his Daughter’s student loans for a popular State College in Ohio. She lived off campus for most of her four years there and used her loan money for not only school, but rent and food and you name it. She finished going four years, but needs a few more classes to graduate, and her degree will be in Geography. Her student loan debt is close to 90k and she’s moved back home and is now enrolled in a 2 year R.N. program that will get her a job. If she defaults her loans guess her Dad gets to pay. Student loan debt is a great way to start out in life.

Hi I dont get the 50 to 60K. i mean a state school is about 16K a year so for a BS your looking at ( 5 years of school that is for most ppl) 80K. and of course the tuition just gets higher each year. so how could someone get his/her BS for less money? in my case i went to a Community college, got all the courses that i can take and than transfered them to a State school. now i have to do 2 more years. so by the time im done ill be at least 50K in debt for a BS. and i thought i did good by going to community college!!! so how could someone get a BS the cheapest way possible?

I’d agree with Dave on this one. There are far too many opportunities to pay for school without going into debt. A big problem I see with people my age is that they are taught “You have to go to college if you want to get ahead in life!” I’ve seen this true in some instances, but in many more it has proven true that you need experience and people skills. I’m in the military currently and I decided I was not going to go into debt for school, so I decided to serve my country. Now when I get out, I’ll have a four year degree in EET completely paid for, a CCNA cert completely paid for, and Fiber Cert completely paid for. On top of that, the government is going to give me money to go earn a second degree. On top of that, I’ll have four years of on the job training making me extremely competitive in the communications field.

I guess I am a living example of how competitive a person can really be in the market without having to go into debt over school. I couldn’t get grants, but my parents can’t pay for me to go to school, and I refused to get loans for the very reason afore mentioned- I don’t want to spend the next 10 years paying off a stupid debt that could have been avoided all together.

Young people listen to me, you don’t have to go into debt for education! It’s a myth!

I think this is a fascinating post and the commenters make some interesting points. I’m a big fan of Dave Ramsey but I find that he does make some generalized statements but presents them as absolutes. I personally had the good fortune of graduating with a BS from a top 5 business school without any debt. I worked hard to earn scholarships, worked a night shift cleaning, and all my bday/christmas money went to tuition and books. I’m headed back to grad school though next year and don’t expect to have the same good fortune. In my case, my wife and I feel it’s important to attend a good grad school and that will incur a certain amount of debt. But again, I’ll work hard after graduating, make smart financial decisions, and pay the debt off as fast as possible.

One thing also to consider is that some private colleges actually give you a better finanical aid package than state colleges. Before you go bashing me, consider this: I am paying for college exactly what my brother at a state school is paying. I only have a $1000 loan to start out with, but I already paid that off. On the contrary, I do know what I want to major in specifically so in my case, going to a private school because I wanted a Christian education is cheaper than getting a secular degree. If I didn’t know what I wanted to major in then the state school is a better option. At my school, I am able to major in just Accounting, which means I don’t have to go through the hassle of taking every business class there is on the planet. I am able to take accounting programs and classes that aren’t even offered at other state school. For example, special classes on taxes, the CPA exam, and corporate accounting specifics. Perhaps the best thing to keep in mind is that every situation is different: take your gen. eds. early in hs because then you don’t waste 2 years at any school, private or public. Plus, then you kind of know what you really want to do by the time you getting into college.

I have a Masters in Computer Science/Information Systems (BS in Management) and got laid off from IBM in 2004 after being with them for nearly 7 years. I haven’t worked anything regular related to the field of computers since 2007. I still have the debt.

You have no guarantee of ever being employed long enough to get the debt paid off. I would consider Dave right on this one.